Articles Posted in Bankruptcy

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The First Circuit affirmed the district court’s judgment affirming the bankruptcy court’s ruling that the largely debt-financed purchase of a family-owned leather manufacturer was not a fraudulent conveyance and was not a violation of the fiduciary duties of the company’s directors. The trustee of a trust established to benefit the creditors of several related insolvent entities filed a complaint alleging that the transaction at issue was a fraudulent conveyance and that the company’s directors were in breach of their fiduciary duties by approving it. The bankruptcy court ruled in the defendants’ favor on every count. The district court affirmed, holding that the bankruptcy court’s factual determinations were not clearly erroneous, and the bankruptcy court found sufficient facts to support its conclusions. View "Development Specialists, Inc. v. Kaplan" on Justia Law

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The district court did not abuse its discretion in denying Appellant’s motion for extension of time to file notice of appeal pursuant to Bankruptcy Rule 8002(d)(1)(B) for failing to show excusable neglect. Appellant filed her motion one business day late as a result of her attorney’s preoccupation with his second job as a church’s music director. The district court concluded that counsel’s explanation for the delay amounted to mere inadvertence and did not constitute excusable neglect. The First Circuit affirmed, holding that the district court did not abuse its discretion in finding that Appellant’s counsel’s inadvertence did not constitute excusable neglect and that Appellant was bound by counsel's carelessness. View "Sheedy v. Bankowski" on Justia Law

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The First Circuit affirmed an order of the bankruptcy court denying Appellant Chapter 7 discharge on the grounds that she made material, knowing, and fraudulent false oaths in the course of her bankruptcy proceedings. The bankruptcy judge concluded that the failure of Appellant, an attorney, to disclose two lawsuits to which she was a party indicated that she had not filed her bankruptcy case in good faith. The United States Bankruptcy Appellate Panel for the First Circuit affirmed. Thereafter, the bankruptcy judge denied Appellant’s discharge, concluding that she had acted with reckless indifference to the truth by failing to disclose the two lawsuits in a timely manner. The district court affirmed. The First Circuit also affirmed, holding that the bankruptcy judge did not clearly err in finding that Appellant had made false statements with reckless indifference to the truth. View "Zizza v. Harrington" on Justia Law

Posted in: Bankruptcy

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The First Circuit reversed the district court’s order denying Appellant’s motion to intervene in an adversary proceeding arising within the Commonwealth’s debt adjustment case under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2161-2177, holding that 11 U.S.C. 1109(b) provides an “unconditional right to intervene” within the meaning of Fed. R. Civ. P. 24(a)(1). Appellant, the Official Committee of Unsecured Creditors (UCC), intervened in an adversary proceeding initiated by Plaintiffs within a larger case brought by the Financial Oversight and Management Board on behalf of the Commonwealth. The Board had commenced quasi-bankruptcy proceedings to restructure the Commonwealth’s debt under a part of PROMESA referred to as Title III. The district court denied the UCC’s motion to intervene with respect both to intervention as of right and to permissive intervention. The First Circuit reversed, holding that section 1109(b) provided the UCC with an unconditional right to intervene in the adversary proceeding. View "Assured Guaranty Corp. v. Official Committee of Unsecured Creditors" on Justia Law

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A creditor appealed a bankruptcy court’s decision to deny a creditor’s motion to appoint a trustee for the bankruptcy estate to replace the debtor in possession of that estate. The Bankruptcy Appellate Panel affirmed the bankruptcy court’s ruling. The First Circuit also affirmed, holding (1) the bankruptcy court did not err in determining that appointment of a trustee was not justified under 11 U.S.C. 1104(a)(1); and (2) the bankruptcy court did not err in finding that the appointment of a trustee would not be in the interests of creditors - the standard for appointment of a trustee under 11 U.S.C. 1104(a)(2). View "United Surety & Indemnity Co. v. Lopez-Munoz" on Justia Law

Posted in: Bankruptcy

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Debtors filed voluntary petitions under chapter 11 of the Bankruptcy Code and a motion seeking bankruptcy court approval of an asset purchase agreement (APA), whereby they agreed to seek substantially all of their assets to Buyer. The bankruptcy court approved the APA through a sale order and confirmed Debtors’ proposed plan of reorganization. Appellants, senior executives of Debtor, were then informed that their employment was terminated the day the sale closed. The bankruptcy court found Buyer liable to Appellants under the APA for their severance pay. The district court vacated the judgment against Buyer, finding that Appellants’ claims against Buyer fell outside the bankruptcy court’s statutorily granted jurisdiction. The First Circuit affirmed, holding that the bankruptcy court had no jurisdiction over Appellants’ claims for severance pay from Buyer because the claims were not proceedings which “arise in” the chapter 11 bankruptcy such that they fell within the grant of jurisdiction contained in 28 U.S.C. 1334. View "Quincy Medical Center v. Gupta" on Justia Law

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Plaintiff sued Debtor after Debtor defaulted on a loan. Plaintiff secured a default judgment in the amount of $137,030.78. Without making payment on the judgment, Debtor later filed for Chapter 7 bankruptcy protection. Plaintiff commenced an adversary proceeding in bankruptcy court seeking an order declaring the debt non-dischargeable. Specifically, Plaintiff claimed that the debt was within the purview of 11 U.S.C. 523(a)(2)(B), which exempts from discharge certain debts. Debtor answered the complaint and then moved to dismiss for failure to state a claim. Plaintiff then moved to amend her complaint to include an alternative claim that the debt was non-dischargeable under 11 U.S.C. 523(a)(2)(A). The bankruptcy court granted Debtor’s motion to dismiss and denied Plaintiff’s motion to amend. The Bankruptcy Appellate Panel for the First Circuit affirmed the bankruptcy court’s dismissal of Plaintiff’s complaint and refusal to allow Plaintiff to add a section 523(a)(2)(A) claim to her complaint. The First Circuit affirmed, holding (1) the section 523(a)(2)(B) claim was properly dismissed; and (2) an adequate basis existed for the bankruptcy court’s denial of Plaintiff’s motion to amend. View "Privitera v. Curran" on Justia Law

Posted in: Bankruptcy, Contracts

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This was the First Circuit’s second set of appeals involving the automatic stay provision of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Here, the parties disputed whether four claims included in Plaintiffs’ second amended complaint were within the scope of PROMESA’s temporary stay. Plaintiffs conceded that the majority of their claims were subject to the stay, but the district court allowed the suit to proceed on the four counts at issue, all of which were purportedly brought under various provisions of PROMESA. On appeal, Appellants challenged this ruling. The First Circuit reversed the district court’s holding that the PROMESA stay did not apply to Plaintiffs’ first, second, third, and twelfth causes of action, as the claims at issue plainly constituted attempts to exercise control over revenues of the Commonwealth of Puerto Rico. View "Lex Claims, LLC v. Garcia-Padilla" on Justia Law

Posted in: Bankruptcy

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In 2005, the Rhode Island Supreme Court found that title to the Regatta Club in Newport and the parcel of land on which it was constructed belonged to a group of condominium associations. Thereafter, the operator of the Regatta Club (Operator) voluntarily filed for Chapter 11 bankruptcy. Two of the title-holding associations (together, Associations) filed proofs of claim seeking relief for the Operator’s alleged trespass on their property between 1998 and 2005. The First Circuit affirmed the bankruptcy court’s finding that the Associations had impliedly consented to the Operator’s use and occupancy of the Regatta Club and remanded on the issue of whether there was an implied obligation that the Operator pay the Associations for its use and occupancy of the Club. On remand, the bankruptcy court found (1) there was no such implied-in-fact contract between the parties, and (2) the Associations were not entitled to relief under a theory of unjust enrichment. The First Circuit affirmed, holding (1) no implied-in-fact contract existed between the parties; and (2) the bankruptcy court did not abuse its discretion in concluding that inequity would not result if the Operator did not pay the Associations for the use and occupancy of the Regatta Club during the claim period. View "Goat Island South Condominium Ass’n v. IDC Clambakes, Inc." on Justia Law

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After Appellants went bankrupt, Appellees foreclosed on their home. Appellants each received an IRS Form 1099-A in the mail at the end of the tax year stating that the foreclosure might have tax consequences. The mortgage debt, however, was discharged during Appellants’ Chapter 7 bankruptcy proceedings. Appellants sued Appellees, claiming that the Forms were a coercive attempt to collect on the mortgage debt, which Appellees had no right to collect. The bankruptcy court found the Forms gave Appellants “no objective basis” to believe Appellees were trying to collect the discharged mortgage debt. The district court affirmed. The First Circuit affirmed, holding that the evidence in the record showed that the Forms were not objectively coercive. View "Bates v. CitiMortgage, Inc." on Justia Law